By Janet Kliment
It sounds like an easy way to make money – I’ll just rent out a room, or maybe even my whole home.
We have seen an increase in these types of platforms online with on-demand business models like Airbnb. There are some considerations to take into account, however, before you become a host – with insurance being one of them.
We get this question a lot: “Does my homeowners’ insurance cover Airbnb or other online rental facilitators?” and the bottom line is no.
Not all homeowners’ insurance policies allow these types of rentals due to their potential liability. When a homeowner (or renter) places a property on Airbnb, whether a room or the whole home, their homeowners’ insurance may have a clause stating that they will not be covered if they are using their home for profit. This Business Pursuit exclusion on a homeowners’ policy is universal for almost all carriers who write homeowners’ insurance.
Airbnb does offer Host Protection Insurance, with coverage described as “up to $1M per incident … if a guest is accidentally injured anywhere in a host’s building or property during a stay.” The problem is that the HPI program has many gaps, including:
- Coverage is limited to $1 million per occurrence; $2 million per location. The policy aggregate is $10 million for all insured locations in the United States. Shared limits are not your friend.
- Sexual assault, liquor liability, electronic data, and a whole list of other items are excluded.
- Coverage is in excess of any other available coverage. The host must submit the claim to his homeowners’ insurance and the claim must be denied by that company before Airbnb’s insurance will pay. Presumably, the homeowners’ insurance may also be cancelled for business use.
- Any damage done to your home or theft of your personal property may not be covered.
So, what does that all mean in laymen’s terms? Here’s a great example:
What if a guest burns down an entire condo building worth $2.5 million? Even if there is coverage for this scenario, anything beyond the initial $1 million offered by HPI would be the responsibility of the host. If the host’s homeowners’ policy declines to cover them, so will the host’s personal umbrella policy.
Therefore, the host would personally be on the hook for $1.5 million.
Be sure to check with your insurance agent before listing your home on Airbnb, as some insurance carriers will allow this type of exposure by adding an endorsement to your policy.
And as a consumer of Airbnb, do you really know how safe the property is that you are renting and whether their insurance carrier will pay for your injuries? Airbnb does ask the homeowner to check for certain issues like smoke alarms, trip and fall hazards, exposed wires, and other such items, but they do NOT require home inspections before allowing owners to post their space for rent on their website. Airbnb specifically states in their Terms of Service that the company is not liable, because anyone using the service assumes liability.
Airbnb is certainly experiencing strong growth, but it’s important for you to understand your coverage before using it as a homeowner or renter. You may in fact be putting your insurance coverage and, more importantly, your own financial stability in jeopardy.
Janet Kliment, CISR, is Vice President, Personal Insurance at Rogers & Gray Insurance. She can be reached at (508) 747-4358 or firstname.lastname@example.org.